Fannie Guidelines specifically state
"Annual earnings must be level or increasing from one year to the next."
This means the underwriter can deny the loan for this reason alone. Freddie UW rules allow for decrease in income so long as decrease can be explainedÂ
â€“ Underwriter must be able to justify that income used is stable and
will continue (difficult to do) â€“ lower amount must be used. With
either Fannie or Freddie, declining commission income is very difficult
to deal with for the underwriter. If the file is marginal, the loan
will likely be declined. But if you have long job history, large down
payment, low ratios, high credit, and significant reserves, you may have
a good case to make for the approval of the loan.
I run into these issues every week and I see the banks really tightening on there income calculations. If you are running into these issues let me know if I can help!